Margin Call- Worth the Risk Capital

From the minute we heard about the new movie Margin Call, we knew we’d be reviewing it (lots of movie buffs in the Attain offices), but with the New Yorker calling Margin Call “easily the best Wall Street movie ever made,” we were curious about how those involved in the film felt about what they’d created. We had the distinct privilege if discussing the film with one of their producers- Neal Dodson. Dodson, along with Corey Moosa and Zachary Quinto, run Before the Door Pictures (deriving its name from a Carnegie Mellon drama exercise), the production company behind Margin Call.

Shout out to the fabulous Sean Cummings (brother to Attain Investment Research Manager John Cummings and credited in the film) for making that happen, by the way.

Turns out, for providing such an insightful glance at the backend of those stock tickers, the producers started the film still very green- at least, as far as investing was concerned. According to Dodson, most of them have very little money invested outside of a 401k somewhere. The exception here was the screenplay’s writer- J.C. Chandor. With experience in real estate and a father who worked for Merrill Lynch for 40 years, he provided much of the research and context for the movie, and the connections to get the setting right. Through Chandor, they were able to get a real sense for what it was like to work on Wall Street during those times.

Dodson recalled walking into the abandoned original offices of Merrill Lynch as they prepared to film. The eeriest part for him was standing in their famed conference room, replete with its long, imposing table and sense of overweight gravitas. “Their rules of engagement were still on the wall,” Dodson recalled. “Like a carcass of the beast.”

That doesn’t mean that those involved didn’t do their homework before creating the film. Citibank, in particular, was very helpful in the research process, with many of the actors in the film having an opportunity to speak with their real life equivalents. Every step of the way, they tried to stay true to life. Chandor had what Dodson referred to as a “cadre of secret advisors” throughout the industry who he could call upon to ensure that they were getting the writing and delivery just right. In fact, throughout the filming process, they would screen parts of the movie to financial industry participants to make sure it was as realistic as possible. While Dodson admits that there were a few times where they did not make suggested changes, those instances were “few and far between.”

In some cases, the line between real life and the movie is substantially blurred. The movie was filmed on an abandoned trading floor, with all the old desks and supplies still in place. A journal was found hidden in an abandoned desk on the set, and inside its pages were hundreds of trades placed over ten years- meticulously hand-recorded by the journal’s original owner, likely as a force of habit from days past or as a way to double check their work. The journal inspired the character development of Quinto’s Sullivan, who they decided was the kind of guy who would keep a journal just like that. The notebook you see Quinto writing in throughout the film? It’s the same one they found on the set.

The movie is not the first to touch on the 2008 crisis. Margin Call follows in the footsteps of heavy hitters like Inside Job and Too Big To Fail, but unlike its predecessors, this fictional take, despite its dedication to realism, is, at the end of the day, just fiction.

But is “just” an appropriate qualifier here? The problem with documentaries, according to Dodson, is that there’s always this purported sense of “truth” to them, even though, at the end of the day, not all the footage is shown, so there’s always this underlying perspective or agenda- though he was quick to add that he loves documentaries and really respects a lot of the people making documentaries today.

“In fiction,” he clarified, “Perspective is chosen- it’s implicit. It allows you to get inside the heads of people and humanize them in a way a documentary doesn’t do. In a documentary, the subject knows they’re being observed, and that skews the story.”

By taking a fictional approach to the crisis, a different side of the tale is told. Instead of faceless concrete banks, you see human beings making decisions.

“We’re not apologizing for them,” Dodson explains. “There are no heroes in this story, and probably fewer villains than some would like. Everyone is compromised.”

After 17 days of filming, a shoestring budget of $3.5 million, and years of hard work to get the movie made, it seems as though their efforts are paying off. Critically acclaimed after a limited release on its opening weekend, Margin Call is making a splash, both for its cinematic achievements and its content. Its punch is partially contextual; the movie is coming out at a pivotal time. With politicians gearing up for the 2012 elections and the Occupy Wall Street movement spreading across the nation, we wondered what the producers hoped for in making the film- especially with some speculating on its role as a galvanizer for the protests.

“Dialogue,” Dodson stated with conviction. “It’s flattering to think our movie could have that much power [within the protests], and I’m a very big believer in the power of art- film, theater, literature- to affect change and alter the way people are thinking, but I don’t know what will happen. It should be interesting. Hopefully the movie gets people talking.”

And as for his own investments? He laughed when we asked.

“[Making the movie] made me more aware of the notions of risk and reward, and more aware of how the system works.” He pauses before continuing. “Though I sure wish I had an enormous amount of financial capital.”

Keep making movies like this one, Dodson, and you just might (P.S. Call us when you do).

What did we think of the movie? Honestly, we went in not expecting a whole lot- maybe because we were still scarred from Wall Street 2- but came out believing the film should be required viewing for anyone with a pulse.

Turns out, taking the crisis out of the crosshairs of the x and y axis and putting it into human hands creates a one of a kind experience. You find yourself cringing at dialogue, flinching at its ugliness, happy that it’s just a movie… until it starts to hit you that it already happened. In some board room, at some point before the whole house of cards came down, that conversation already took place. Then you start to wonder if it’s less a drama flick than it is horror.

When you put the numbers and decisions into the form of a person, it boils up all the feelings you had toward the crisis in a whole new light. You’re not just angry with the players; you’re angry with the game.

The writing was eerily true to life, but a collection of solid performances made it hit home. Dodson was right about there being no heroes, but there are a couple you hope suffer a little less than the others, giving the film the depth it needs to keep our attention. Paul Bettany’s tough and jaded Will Emerson foils nicely with the well-grounded, though flawed, Eric Dale via Stanley Tucci, but it’s Kevin Spacey pseudo-tortured Sam Rogers that really steals the show.

For the first time, the tipping point of the crisis is portrayed as a “lose-lose” situation. The documentaries that came before did a very good job of explaining how all of the decisions made leading up to the crisis interacted, but this movie focuses on those decisions made in the final hour. You almost feel bad for some of the characters. There are a select few who had tried to sound the alarm well in advance or who had never been exposed to the right information to do so, but they’re caught in the web in the same fashion as the rest. But like we said, you only almost feel bad. No one comes out of this smelling of roses.

Margin Call, if it has to be summed up in one word, is brave. It tackles a significant and complex topic in a way that fluidly blurs the lines between history and story-telling, and it does so with a brutal honesty that may not sit well with the audience. It’s a perfectly executed rant from Bettany as he advises another analyst that aims straight for the heart of things:

“If you really wanna do this with your life, you have to believe that you’re necessary, and you are. People wanna live like this in their cars and their big f***ing houses that they can’t even pay for? Then you’re necessary. The only reason that they get to continue living like kings is that we’ve got our fingers on the scales in their favor. I take my hand off? Well, then the whole world gets really f***ing fair really f***ing quickly, and nobody actually wants that. They say they do, but they don’t. They want what we have to give them, but they also want to, you know, play innocent and pretend they have no idea where it came from. Well, that’s more hypocrisy than I’m willing to swallow, so f*** ’em.”

It’s a slap in the face for the audience, who, until that point, watched the drama unfold between the characters within a bubble that couldn’t quite reach them. Suddenly they’re faced with the prospect of a collective responsibility, and it’s unsettling, to say the least.

The bottom line here is that the movie will make you think and feel about the crisis in a context you weren’t used to and might not be ready for. If that kind of threat isn’t enough to make you want to see it, think about it this way: it was a finance-based drama that was actually worth the price of a movie ticket. That alone should be incentive enough.

Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship and self reporting biases, and instant history.

The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on Attain’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by Attain, and averaging of various indices designed to track said asset classes.

Managed Futures Disclaimer:

Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.

This communication is intended for the sole use of the intended recipient and is for informational purposes only. It is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. No market data or other information is warranted by Attain Capital Management as to completeness or accuracy, express or implied, and is subject to change without notice. Any comments or statements made herein do not necessarily reflect those of Attain Capital Management, or their respective subsidiaries, affiliates, officers or employees.

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DISCLAIMER

Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. You should not rely on any of the information as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments.

The entries on this blog are intended to further subscribers understanding, education, and - at times - enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship and self reporting biases, and instant history.

The performance data for various Commodity Trading Advisor ("CTA") and Commodity Pools are compiled from various sources, including Barclay Hedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on RCM’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by RCM, and averaging of various indices designed to track said asset classes.

The mention of market based performance (i.e. Corn was up 5% today) reflects all available information as of the time and date of the publication.

The owner of this blog, RCM Alternatives, may receive various forms of compensation from certain investment managers highlighted and/or mentioned within the blog, including but not limited to retaining: a portion of trade commissions, a portion of the fees charged to investors by the investment managers, a portion of the fees for operating a fund for the investment managers via affiliate Attain Portfolio Advisors, or via direct payment for marketing services.

Managed Futures Disclaimer:

Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.

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Disclaimer

Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.
The mention of market based performance (i.e. Corn was up 5% today) reflects all available information as of the time and date of the publication.